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ECB seeks bad loan data from UniCredit and other Italy banks

A string of Italian banks, including top lender UniCredit and Banca Monte dei Paschi di Siena, said on Monday the European Central Bank had asked for data on their bad loan portfolios.

PHOTO: BLOOMBERG

[MILAN] A string of Italian banks, including top lender UniCredit and Banca Monte dei Paschi di Siena, said on Monday the European Central Bank had asked for data on their bad loan portfolios.

The investigation, part of the ECB's ongoing supervision of European banks, is aimed at assessing strategies, governance and methodologies used by the lenders in the management of non-performing loans (NPL), the banks said.

On Sunday an ECB spokesman said Frankfurt was quizzing a number of euro zone lenders about high levels of bad loans as it steps up efforts to tackle the region's mountain of bad debt.

Soured loans across Europe are threatening to undermine economic recovery by crimping banks' ability to lend, especially in slower-growing economies.

The situation is particularly marked in Italy where investors are growing increasingly nervous about how the sector plans to deal with 200 billion euros of loans that are unlikely to be repaid.

Italy recently presented a new proposal to the European Commission to help its banks offload bad loans which it hopes will soon be approved.

On Monday, Italy's banking index fell 5.7 per cent with Monte dei Paschi the biggest loser with a 14.8 per cent drop.

Italy's oldest bank, the only Italian lender to be bailed out during the financial crisis, is saddled with problematic loans equal to more than a fifth of its total client loans.

Other Italian banks informed of the ECB's bad-loan monitoring included Banco Popolare and Banca Popolare di Milano, two cooperative lenders currently involved in tie-up talks to improve efficiency. "The ECB has informed the bank it has started an assessment on NPLs... as part of the ongoing supervision process which will involve... other Italian and European banks," Popolare di Milano said in a statement.

The assessment will take place some time between January and February, Banco Popolare said.

Lenders who had not received any notification from the ECB on bad loan assessment included Italy's No 1 retail bank Intesa Sanpaolo, top merchant bank Mediobanca and UBI Banca.

Earlier this month JP Morgan said Italian banks should be avoided partly because credit problems limited a recovery in provisions.